Answer:
The price of this car=$13,015.925
Explanation:
Given data:
Amount each year=$2,500
Time period=7 years
interest rate=8%
Required:
The price of this car=?
Solution:
The Formula we are going to use is:
[tex]PV=A*(\frac{1-(1+r)^{-n}}{r})[/tex]
Where:
PV is the price of car i.e present value
A is the payment made each year
n is the time period in which payments are paid
r is the interest rate
A=$2,500, r=8%=0.08, n=7
[tex]PV=\$2,500*\frac{1-(1+0.08)^{-7}}{0.08} \\PV=\$13,015.925[/tex]
The price of this car=$13,015.925
